Search

Each phase of drug development offers its own unique challenges. The generation of lead compounds that may advance through the pipeline of FDA approval is a costly process, and new molecular entities that are advanced as leads through the process of FDA approval face abundant chances of failure: the likelihood of a given compound making it from Phase I through to approval is only 11.8%*.

Entrepreneurs and researchers developing drugs outside of big pharma will need to understand the costs facing an asset at every stage, and have a plan for how to efficiently structure their capital raises and outreach.

Figure 1 shows a breakdown of FDA-filing costs, estimated costs for each phase of FDA approval, and the likelihood of advancement between phases. The data portrayed in the figure come from the latest (published Feb 2016) in a series of research papers examining R&D costs in the pharmaceutical industry, authored by researchers at Tufts Center for the Study of Drug Development, the Department of Economics at Duke, and the Simon Business School at the University of Rochester. The data comes from a survey of 10 top multinational pharmaceutical firms which conducted in-house discovery and pre-clinical programs. The R&D costs incurred per approved drug in these settings were calculated to be $430 million, a figure which is likely larger than development costs incurred in academic settings. Once an IND is filed ($550,000), each subsequent phase of approval is more expensive. The estimated likelihood of advancement, or success in the phase, is lower in Phase II than other phases, making a Phase II success an important inflection point from an investment perspective.

Figure 1. Estimated non-capitalized costs for new drug development and advancement between phases of FDA approval.

The LSN Investor database contains data about the phases of development that firms have expressed interest in. A breakdown of this data is shown in Figure 2. Venture capital firms have expressed the most interest in funding pre-clinical and Phase I therapeutic leads. Private equity firms, being more risk averse, express increasing interest in later phase assets. Interestingly, large pharmaceutical and hedge fund firms step in for the riskier Phase II trials while their corporate venture arms are more interested in earlier phases of development. Family offices express similar levels of interest across all phases of development.

Knowing the distribution of capital amongst the different firms can help entrepreneurs plan their raises to bring them through the various phases and hurdles of development.

Distribution of capital amongst investor types at different phases of development

Figure 2. Data retrieved from LSN’s Investor Database on 27 July 2016. Representative of active mandates that are open to investment in the Therapeutics sector.

Hot Mandates

The firm is focused on therapeutics companies and does not invest in medical devices, diagnostics, or digital health. The firm is open to considering assets of very early stages, even those as early as lead optimization phase. The firm considers various modalities, including antibodies, small molecules, and cell therapy. Currently, the firm is not interested in gene therapy. Indication-wise, the firm is most interested in oncology and autoimmune diseases but has recently looked at fibrotic diseases and certain rare diseases as well.

The firm is opportunistic across all subsectors of healthcare. Within MedTech, the firm is most interested in medical devices, artificial intelligence, robotics, and mobile health. The firm is seeking post-prototype innovations that are FDA cleared or are close to receiving clearance. Within therapeutics, the firm is interested in therapeutics for large disease markets such as oncology, neurology, and metabolic diseases. The firm is open to all modalities with a special interest in immunotherapy and cell therapy.

A strategic investment firm of a large global pharmaceutical makes investments ranging from $5 million to $30 million, acting either as a sole investor or within a syndicate. The firm is open to considering therapeutic opportunities globally, but only if the company is pursuing a market opportunity in the USA and is in dialogue with the US FDA.

The firm is currently looking for new investment opportunities in enterprise software, medical devices, and the healthcare IT space. The firm will invest in 510k devices and healthcare IT companies, and it is very opportunistic in terms of indications. In the past, the firm was active in medical device companies developing dental devices, endovascular innovation devices, and women’s health devices.

A venture capital firm founded in 2005 has multiple offices throughout Asia, New York, and San Diego. The firm has closed its fifth fund in 2017 and is currently raising a sixth fund, which the firm is targeting to be the largest fund to date. The firm continues to actively seek investment opportunities across a […]

Featured: All About Innovation Challenge

Companies from all categories of life science are encouraged to apply to Innovation Challenge for RESI Healthtech Week. Eligible companies can apply to Day 1 the First Coast Innovator’s Gathering, Day 2 RESI Global Partnering or both. Applicants will have the opportunity for excellent visibility among investors and strategic partners.

By Samuel Rubin, Business Development Manager, LSN For the first time this fall, Life Science Nation (LSN) will have two days of competition as part of the RESI Healthtech Week (September 5-7, 2018). Day 1 will feature the First Coast Innovation Challenge, where the top 10 ranked companies of the First Coast tech hubs will present […]

By Jessica Yang, Investor Research Analyst, LSN On June 4th, more than 700 scientist-entrepreneurs and investors entered the exhibition hall at Boston Marriott Copley Place to participate in the RESI conference. They were greeted by 30 Innovation Challenge finalists across therapeutics, medical device, diagnostics, and digital health sectors. The 30 companies, evaluated by LSN’s expert […]

By James Huang, Research Analyst, LSN We are excited to showcase the top RESI Innovation Challenge startup applicants, who will be taking part in the poster presentation showcase at the second annual RESI BIO held in Boston this year, alongside the BIO International conference. These handpicked companies represent the key sectors of the healthcare space […]

An interview with Steven ten Holder, COO, Acorn Biolabs – By Greg Mannix, VP of International Business Development, LSN This year’s 2nd place finisher at the Innovation Challenge at RESI on MaRS was Acorn Biolabs. LSN interviewed COO, Steven ten Holder and got some key takeaways on how Acorn used the RESI Innovation Challenge effectively: […]